Johnathan Paoli
Cosatu has welcomed Parliamentary Standing Committee Finance’s decision for the two-pot pension reforms to kick in from 1 March next year as opposed to the March 2025 date suggested by the Treasury to give SARS and the retirement industry more time to put systems in place.
The two-pot retirement system is designed to allow consumers to draw some of their retirement savings before they retire to fund unexpected expenses instead of turning to expensive debt alternatives.
However, two thirds of contributions will still go to a retirement pot that will only be accessible after normal retirement age, while the remaining one-third will go into a savings pot, allowing immediate access under certain conditions.
Acting National Spokesperson and Parliamentary Coordinator Matthew Parks said Cosatu was pleased that the committee members stood with workers in defence of the 1 March 2024 implementation date after some organisations, in pursuit of maximising profits, sought to delay these legislative reforms until 2025 and possibly even further.
Parks said this will provide welcome relief to millions of highly indebted workers, in both the private and public sectors, who will be able to access limited portions of their pensions without having to resign from their jobs nor cash out their entire funds.
Workers were currently drowning due to a struggling economy, a 41% unemployment rate, rising costs of living and repo rate hikes while the current pension laws only allow workers access to their pension funds when they retire or in the event of losing their job or resigning, Parks said.
He said the two-pot reforms offered a positive balance where workers will be able to access up to R30 000 when the law comes into effect and from then on to access one third of their annual contributions without resigning to have some access to their pension funds.
In addition, Parks said the reforms will have the added benefit of helping to boost savings in the longer term as workers will no longer be cashing out their entire pension funds but rather accessing a limited portion.
He stressed the need for haste and said that in order to ensure that this long sought relief takes place on 1 March 2024, it was critical Parliament move with speed to conclude its remaining processes in the National Assembly and the National Council of Provinces before rising in December in order to allow the President to assent to the Bill and for the remaining administrative processes be undertaken by Treasury, the Sars and the pension funds in time.
However, some have argued against the denial of the extension, with the head of assurance at Allan Gray, Richard Carter saying that he was concerned about what this meant for the industry and investors and that there are significant risks to rushing the legislation needed for the system to operate.
“Given that consultations on the details are still in progress and that regulation is still being finalised, we believe that moving it forward is premature. 2025 is a more sensible timeline as it gives everyone time to accommodate the changes,” Carter said.
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